A couple weeks ago I was introduced to a publisher who wanted me to review a book. The book is Snap Judgment by David Adler.
The book is based in behavioral finance, so they probably have the expectation that by giving me a free book, I will be psychologically inclined to give the book a favorable review-- well they won't be disappointed.
Snap Judgment is based around the premise that our initial instincts, while important in certain areas, fail miserably when it comes to deep analytical thought. Mr. Adler brings up Gladwell's Blink -- the book in every airport commisary, and how the assumption that "intuition" works when it comes to really hard, analytical problems.
When it comes to behavioral finance, I view it from two angles: how it can hurt others and how it can benefit me in my trading; the latter with which I'm much more concerned. The initial parts of the book are definitely beneficial to the trader, explaining newer concepts such as the disposition effect and how we anthromorphize stocks (not good!).
Adler claims that evolution has driven our minds to have the ability to make really good impulse decisions, but only when the environment requires one. In the realm of finance and trading, going with quick, first instincts can prove disastrous.
The way the book is structured is that each chapter almost be read independently of the other chapters-- sort of like behavioral finance snack packs. The first part is related to markets and trading, which was the area where I derived the most value. The second part relates to interdisciplinary gambling (NFL drafts, tennis, horse racing) in which our initial judgements prove disastrous. The third part relates to personal finance and our underlying irrational behaviors. The fourth and fifth part relate to CEO behavior and the underlying psychological background behind the 2008 crash. I found the first two parts much more insightful than the backend, mainly to my field knowledge of the 2008 nonsense and the fact that I'm much more interested in how behavioral finance can help me make money.
All in all, makes for a great read, especially if you have little field knowledge in the area-- it can provide a quick primer into behavioral finance and lead to further inquiry in how to incorporate this into your trading strategy.
The publisher has been so kind as to provide three extra copies as a giveaway to my readers! Two of the books will be given to randomly selected subscribers, but anyone can win the third one. Here's how we'll play this game:
Use this bitly link (http://bit.ly/ePUI7) and tweet out the book review to all of your followers. I'll keep track of who's tweeted this out, and in 7 days, I'll select a person at random to get the book.
Pretty simple contest, isn't it?
You can get more information about Adler's book here.